Supply Chain Key Performance Indicators


A venture’s supply chain is central to its success. If you want to make money, you need an efficient supply chain. If you have a bad one, people won’t buy your stuff because they can’t get it! Here is what you should know about key performance indicators.

What Are Supply Chain Key Performance Indicators

They are established definite parameters for measuring and evaluating supply chain performance. The performance indicators measure stock accuracy and turnover measurements, e.t.c.

Supply chain KPI help to find out continuous growth, delivery effort, and the firm’s supply fulfillment. A business can tell if they are doing well or not by looking at its numbers. Here is a list of supply chain key performance indicators to ensure business growth.

What Are The Top Supply Chain Key Performance Indicators?

Here are the top seven key supply chain performance indicators for your business success.

1. Cash Time Cycle 

This is used to calculate how long it takes for an organization’s inventories to turn into money. So, to calculate this, learn the days of stocks (DOS), the days of payables (DOP), and the days of receivables (DOR).

A cash time cycle metric is how long it takes to get your money back from someone else after you paid them. Because the shorter the period of the conversion cycle, the better. This KPI assists in taking proper gauges to ensure efficiency.

2. Freight Bill Accuracy

It covers the shipping fee from manufacturers to warehouses. And it spans from the warehouse to the customer.

Billing accuracy is essential to profitability as well as consumer satisfaction. Thus, adopting it will ease the detection of destructive trends. Also, it will enhance your shipping accuracy and help your business to thrive. 

To calculate your freight bill accuracy, divide your error-free cargo bills by the total freight bills. Multiply it by 100.

3. Perfect Order Rate

It is one of the most crucial supply chain metrics for several business sectors. Moreover, it examines the distribution success rate and how 3PL handles your inventory delivery. Because the higher the perfect order rate, the better. In other words, POR affects your consumer loyalty and retention points.

4. Days Sales Outstanding 

The Days Sales Outstanding metrics calculate the customer’s debit/ payment turnover. A low ‘days sales outstanding’ number means it takes a venture fewer days to receive its account receivable. So, a higher DSO implies that a firm is selling its inventories on a credit basis, and it takes a longer time for customers to pay back. This action restrains cash flow and reduces profits. By calculating and assessing this often, businesses will ask for payment. This will improve the business’s cash flow and profitability in the long run.

5. Stock Turnover 

Businesses want to know how often they sell their products at a specific time. They also want to know if they are selling too much or not enough. This will help them plan for the future and ensure enough stock for their clients. So, how do you get your inventory turnover? Calculate your delivery (on-time) shipping rate and weigh it to your competitor’s rate. It will give you a detailed management reporting procedure.

6. Gross Margin ROI

Every enterprise seeks to meet the best return on investment (ROI ) for every inventory. Maintaining a recurring solid return on investment is the icing of an ongoing online business. In supply chain KPIs, the gross margin ROI expresses the profit achieved for every AED. So, you will gain a deep insight into your portfolio by tracking this metric every month. I.e., know which products are good players and generating profit.

7. Supply Chain Cost (SCC) 

Costs and rates are one of the supply chain metrics. It indicates pertinent fees as they relate to supply chain management. These costs comprise planning, delivering, and sourcing. It reveals how productive and effective each section of the firm is.

For businesses to enhance their revenue margin, curtailing costs is essential. Hence, the firm can specify if there is room for improvement without intensifying sales.

Also, conduct a benchmark performance and weigh it against your competitor’s. It will reveal whether your supply chain is healthy or needs assessment. 

Conclusion

The KPI is a metric that helps a company assure itself of the growth and development of the business and its efficiency. KPIs help finds how the organization is growing, how well it is handling its resources and the factors that impact the business.

 If a company needs to improve or stay competitive, it must do everything at the top. This means counting up how many times you did something good or bad and deciding how you can do better next time. 

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